Another day, another dry report. Every day a government agency produces something so dry it must have been born in the Kalahari … Oh God, could this be any more boring?
Stay with me, please. I will make the latest report interesting (promise) and also make the outrageous claim that I can solve one of Australia’s great problems before you get to the end of this column. Well, I’ll try.
This week, the bureaucrats in Canberra released a real biggie for all the connoisseurs of big-picture demographic data (yes, there are people like that. I’m one of them).
The 2021 Intergenerational Report (IGR) looks 40 years into the future. Its official goal is to predict the future so Treasury understands how much money it can spend. The Intergenerational Reports are also the bureaucrats’ tool to encourage politicians to consider the consequences of their policies beyond the next election cycle. What a noble goal. Good luck with that!
So, let’s get into it. It’s not that scary. Let’s start with the main demographic assumptions of the report.
How to support an ageing population ?
First, the birth rate decline means fewer babies. Then we’ll have a low migration intake for a few more years, meaning fewer workers. Of course, we’ll keep growing older – no way to stop that. That means Australia will have more old people to look after. As a consequence of all that, over the next decade we will lose out on well over a million people in Australia who could have added to our GDP.
The report’s a bit more detailed than that, but that’s the gist. The demographic assumptions in the report appear sound and plausible to me. We can work with that.
This is the task for Australia’s workers in the near and distant future. They must find a way to support a growing pool of older people. This trend becomes more extreme each year. This is what we’re saying to our young workers: you need to help support your oldies, lots of them. Sounds like the youngies may not love that idea.
So, what can we do to make it work? Let’s do what every politician thinks about first – let’s try taxation. If we want to maintain or even improve our living standards, we could tax the shrinking workforce more. That works like a dream in an Excel spreadsheet but in real life, not so good. Politicians know the drill. Workers can only be taxed so much before they boot you out of office. Ouch.
The role of superannuation
Of course, you might ask why am I worried about the ageing population? Didn’t we introduce something to fix that problem? That’s right. It was called a superannuation scheme and it works like this.
Every worker puts about a tenth of their earnings into their own little retirement bucket. This forced prudence is meant to ensure that we all have enough retirement savings. If you pay for your own retirement, the government doesn’t need to pay you a pension.
Pension systems in aging societies are freakishly expensive. We want to avoid that. Superannuation keeps the rich and the middle-class away from the pension. People on low-incomes or unemployment benefits need expensive top-ups to their superannuation balance to finance their retirement. A recent review of the superannuation scheme confirmed that it’s lowering the overall need for pension payments.
In recent years, we added plenty highly skilled and well-paid workers to the Australian workforce, but we also added plenty of low-skilled workers via the gig-economy. It will be hard for a shrinking workforce to support more low-income retirees.
Get rid of low-income earners
Now here’s my outrageous suggestion. Wait for it.
Maybe we could just get rid of low-income earners completely?
Hear me out. I’m not suggesting calling in the Mafia on an industrial scale. In a sense, the movement I am talking about has already started. Low-income jobs are more easily automated than high income jobs. Amazon warehouses use more robots and fewer forklift drivers; modern factories use more complex machines and fewer workers and supermarkets have more self-checkouts and fewer checkout clerks. We hear a lot about jobs being automated away. It sounds scary but it’s not a bad thing at all.
We need to transition our economy away from low-skilled repetitive jobs. Of course, that change comes with a lot of pain. After all, these are real people being pushed out of their jobs with real lives, feeling real pain, struggling to get through life. In times of economic change, social safety nets are crucial to make sure people are protected. This is our collective responsibility.
Now back to my outrageous claim. Maybe I exaggerated just a tad. We won’t get rid of low-income workers through automation alone. Of course, we won’t. Many of our most important low-income jobs don’t lend themselves to automation.
Carer positions for example are low-skilled jobs that will be in even higher demand in the future. Robots don’t stand a chance. We will simply force those industries to pay their workers more. They’ll become much better paid low-income workers. Let’s give them a new name – WOOLIs (Workers Once On Low Incomes). Not to be confused with a certain supermarket chain …
Hope you’ll see now how those reports that land with a thud each week need to be taken seriously. We need to learn the lessons and restructure our workforce. A small workforce needs to be extremely productive if it has to support a large group of retired Australians – even with a super scheme. I mean being productive in the economic sense, of course.
None of what I say is a value judgement of people in low-skilled jobs.
We also need to remember that all of this restructuring takes time. It can’t be achieved within a single election cycle.
A taxi driver (whose car now drives itself) is not likely to become the next high-paying cyber security analyst. We need to restructure the mix of our workforce from the ground up. The real restructuring starts with the high school graduates of today.
Education is key
To improve productivity, we need to ensure that we educate our relatively small workforce better. Don’t skip on education. Universal free TAFE is a must. TAFEs have the potential to lift people from low-skilled backgrounds into the middle-skilled work. TAFEs are the golden ticket into the middle-class.
Universities are the golden ticket to high-income jobs. University degrees shouldn’t be prohibitively expensive, like in the US, but since education is so closely correlated with income, free TAFEs should be the priority.
See, I promised the Intergenerational Report wouldn’t be dry. We’ve solved a lot of problems today. Plus, we got to warmly welcome robots, convince our politicians to make something free and made all of us richer along the way. Winner, winner, winner.
Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. Follow Simon on Twitter or LinkedIn for daily data insights.
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